Busting Up The Cable Oligopoly

Another appellate Court ruling says local authorities don't have the jurisdiction to force cable operators to open up their facilities to competitors. If not local authorities and municipalities, then who will break the cable duopoly?

by Jim Wagner & Patricia Fusco [July 13, 2001]

After a one year waiting game, the U.S. Fourth Circuit Court of Appeals ruled this week that a Henrico County, Va. ordinance is preempted by federal law that requires AT&T to allow independent Internet service providers access to AT&T's high-speed cable platform. At least, that is, on the same competitive footing as any ISP owned by AT&T.

Of course, AT&T doesn't see it that way—the nation's top cable operator was quick to champion the court's ruling as a decisive blow to shared cable access.

Mark Rosenbloom, AT&T vice president for law , said the ruling marks the last local challenge by the lower courts to put conditions on its operations.

"It affirms what we've argued since the forced access debate emerged three years ago in Portland—Federal law very clearly prohibits municipalities from requiring cable companies to provide telecom services or facilities as a condition to obtaining a license to operate," Rosenbloom said.

"We hope this puts an end to the argument that municipalities should mandate forced access for cable companies," he added.

Cable rationing rationale
The U.S. Fourth District Court of Appeals in Washington, D.C. upheld a lower court ruling that stated Henrico County doesn't have jurisdiction to force AT&T subsidiary, MediaOne, into sharing its MSO facilities with unaffiliated ISPs.

Judge Blane Michael, in his written opinion, reaffirmed the court's insistence that federal regulators—not local municipalities, should decide the issue of shared cable access.

"We do not have to reach the question of whether MediaOne's bundled Road Runner service is a cable service, a telecommunications service or an information service," Michael wrote. "For the time being, therefore, we are content to leave these issues to the expertise of the Federal Communications Commission."

Additionally, the Fourth Circuit specifically noted that AT&T has committed to the FCC that it will voluntarily provide open access by the end of this year. AT&T cannot back away from that commitment now, unless the FCC chooses not to enforce AT&T's open access vow. So AT&T's legal analysis that open access is dead, is far from reality.

Policy hang-ups
Advocates of open access have been trying for years to get a FCC order stating just that—cable headends should be unbundled just like telecom access is shared at the central office.

But the FCC has lollygagged about—neither taking a definitive stance embracing open access—nor denying it. Federal regulators did apply open access conditions on the America Online-Time Warner merger. But the terms of the deal are such that AOL could opt not to deploy its own brand of cable modem access in order to keep rival ISPs from sharing its cable facilities.

According to Michelle Russo, a spokesperson at the FCC's cable bureau, the only official action the agency has taken in regards to the issue, was to commence a Notice of Intent (NOI) proceeding.

The FCC's Internet Access Over Cable NOI [PDF] sought comment on whether cable modem technology should be classified as a cable service, a telecommunications service, or an information service, and the implications of adopting any particular classification.

The Appellate Court utilized this to conclude that "we do not have to reach the question of whether MediaOne's bundled Road Runner service is a cable service, a telecommunications service, or an information service. For the time being, therefore, we are content to leave these issues to the expertise of the FCC."

Unfortunately, seven months after the NOI was ordered, the FCC is no closer to making a proposed order than it was at the beginning of the year. "We're still reviewing the comments," Russo said.

Enough, already
Dr. Mark Cooper, director of research for the Consumer Federation of America, said its long past the time when the FCC should step in and make a ruling on open access.

"It's quite clear that the FCC ought to definitively sort out this issue," Cooper said. "The only question is whether this FCC will have the backbone to stand up and try and figure out what it is and how they're going to deal with it, other than just letting it lay out there.

"From our point of view, the important part is to get the cable networks open," Cooper continued. "We have been asking the FCC to make a ruling for several years. The only reason we went to the state level was because the FCC abdicated its responsibility to make a choice."

Numbers theory
Nearly one-third of American Internet users have broadband access at home, work or school according to a study by Arbitron, out of an estimated 168 million users.

Excite@Home provides cable modem services to about 3.2 million users, Road Runner reports 1.2 million subscribers, Cox Cable has slightly more than 500,000 cable modem customers, while Charter Cable and Cablevision round out the major cable players with more than 300,000 cable Internet users each.

Do the math—that's 5.5 million cable access users in the U.S.—Or 3.3 percent of the total online population.

Not surprisingly, Robert Sachs, president and chief executive officer of the National Cable & Telecommunications Association (NCTA), the mouthpiece of the cable industry, said he was pleased with the decision.

"The Fourth Circuit's decision in the Henrico case offers the strongest judicial affirmation yet that public policy decisions regarding cable modem services are not within the jurisdiction of local governments," Sachs said. "(Wednesday's) court decision will further encourage the rapid deployment of high-speed cable Internet services to consumers."

Running to stand still
But AT&T and other network owners have been dragging their feet over a half-decade due to open access arguments. Since the mid-90s when engineers first found they could alter the nation's one-way cable systems to two-way access, providing yet another broadband solution for the nation.

Cable modem access is not stalled by weak-kneed regulators kowtowing to big business anymore than the Henrico ruling put an end to the debate about open access.

Shared cable networking is nearly stopped in its coaxial tracks because big telecom—like AT&T, and media monoliths—like AOL, refuse to build their communications duopolies around a distributed business model invoking the assistance of rival service providers.

We all know what type of financial burden this lack of vision has place on AT&T. How long do you suppose it will be before AOL feels the same pain?

— End